Improving the Role of Eximbanks/ECAs in the OIC Member States
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LCI is reinsured by reinsurers that specialize in credit and bonds reinsurance. Its partnership
with regional insurance companies is also enabling information exchange and adding to the
company’s credibility in the market.
However, according to a study conducted by LCI, of Lebanon’s annual exports of USD 4 billion,
60% are “uninsurable” in the private market. This means that reinsurance would not be available
to cover these transactions – either due to the nature of the export or the export destination.
Most Lebanese exports are sold on the basis of an L/C, which means that trade transactions are
bank-intermediated and therefore more expensive than a competitor who is selling on open
account terms.
While Lebanon has a thriving banking and insurance sector, there is no official ECA that could
help drive export development, support the growth of SMEs and provide back-stop products
such as credit guarantees to banks and reinsurance to LCI take more risks.
There are some lessons that can be drawn from the Lebanese example.
1. Private sector has significant capacity to insure exports but cannot meet all the
needs: LCI has shown that a private entity can play a significant role in effectively
addressing some of the needs of exporters in Lebanon and doing so on a financially
sound basis by expanding into other markets. However, there are significant export
transactions which cannot be placed in the private market and that go uninsured – or
do not happen at all – for lack of options.
2. Holistic support to clients: LCI provides optional complementary services to its
clients. This includes providing critical inputs in the form of information or technical
support that is intended to positively affect clients’ financial health and the decisions
they make with respect to their business growth and expansion.
5.3. Non-OIC Case Studies
5.3.1. New Zealand
The Pragmatic Go-Slow Approach
The New Zealand ECA was only recently established in 2001. In the early 1980s, during a period
of fiscal crisis and government spending reforms, the government-backed credit insurer EXGO
was privatized, leaving no government financial backing to support and promote New Zealand
exports.
In 2000, after much clamouring from exporters, the New Zealand government issued a call for
proposals to conduct research on the market gaps and potential role an ECA could play. In the
Request for Proposals, it noted “attention has been drawn by a number of exporters to an
apparent failure in the export financing market. Some exporters believe that the lack of certain
products is hampering their export development. The Government wishes to explore in detail these
alleged market failures and consider possible solutions.”